Errors and Omissions Small Business Insurance #OmissionsSmallBusinessInsurance

Errors and omissions small business insurance, also known as professional liability insurance, professional indemnity insurance, or, to medical professionals, as malpractice insurance, provides protection to professionals in the event that a mistake is made by the professional.

Omissions Small Business Insurance

This type of insurance is a form of liability coverage that protects professionals who provide services or advice from having to bear the entire cost of legal defense against a claim made by a client and/or damages awarded in a lawsuit.

When there is an allegation from a client claiming failure to perform by the business or professional, this type of coverage protects small business owners against monetary loss caused by the lawsuit and the «error or omission» in the product sold or service provided by the insured. This type of legal suit is not covered under a general liability policy. Some professional liability policies often provide for the cost of legal defense if the allegations turn out to be groundless but often do not allow for a wide range of civil liabilities or criminal charges. In certain areas and for some specific types of professionals, professional liability insurance is a requirement of the law and often a requirement via contracts with certain businesses who may be the recipients of the professional’s products or services.

A good reason to invest in professional liability insurance is that most general liability insurance policies only cover personal injury, property damage, advertising injury claims, or bodily damage. Some may even cover product, public, or employer’s liability claims. The hard truth, however, is that professional products and services may cause damages or injuries not named in these types of policies. Professional liability insurance is meant to kick in for these cases, including good faith or fair dealings violation claims, misrepresentation claims, negligence claims, or inaccurate device claims.

The basis for setting up professional liability is called a «claims-made basis». This means the policy will cover claims made during the specified policy period only. Typically, a policy will provide the insured with indemnity against any losses arising from claims that are made during the period listed on the policy. Claims related to incidents that may have occurred before the policy was active are likely not covered, though some policies may allow for retroactive dates. It is very important to pay attention to policy wording as some are worded very tightly and are designed to meet only a minimum wording approval. Wordings containing huge legal differences often appear confusingly similar to those without legal background so it is important that an attorney review all policies.

Coverage is usually extended for as long as the small business continues to provide the services or products covered in the policy, and includes the span of any statute of limitations that may be applicable in any filed suit. Cancellation of the policy prior to this time would negate any coverage previously extended to the business, seemingly as if there had never been any coverage at all. Any lapse in policy coverage may result in «coverage gaps,» which is defined as the loss of all prior acts.

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